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Shareholder Primacy

Shareholder primacy is a social norm that arises primarily within certain theories of profit maximization that mandate management’s obligations to shareholders when there is a separation between the ownership and control of a corporation. Shareholder primacy requires that managers give primary attention to the needs and desires of shareholder interests and prioritize those interests before the interests of other constituents of corporations. This entry covers the history and some controversial aspects of the purported justifications of shareholder primacy.

History and Development of Shareholder Primacy

Theories of shareholder primacy began to develop in response to the changing socioeconomic environment of the late 19th and early 20th centuries. Prior to this time, the overwhelming majority of owners managed their own businesses. In the mid-1800s, a shift began taking place ...

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